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Business prospects, lending increases throughout state

Bank lending in California grew at the fastest pace in the nation over the past year, even as banks throughout the state cut back on bad debt and other nonperforming assets, according to the latest reports by the Federal Reserve Bank of San Francisco and other bank monitoring agencies.

On average, California banks grew by 14 percent during the year, reaching a median size of $434 million, compared to the nationwide growth of 5 percent, hitting a median of $167 million.

The growth in California banks reflects the growing health of the statewide economy.

"The Golden State’s strong economic performance comes as a surprise to much of the nation, which continues to be fed a near endless stream of negative feedback on the state," read a report last month by Wells Fargo Securities. "While California faces considerable challenges, businesses have been adding jobs at a faster pace in California than they have nationwide for the past 38 months. New business startups are also trending higher, and venture capital continues to flow into the state in greater quantities than anyplace in the world."

As business prospects have risen, so has lending.

Between the first quarter of 2014 and the first quarter of 2015, California banks increased their loans by an average of 14.9 percent -- nearly twice the national average of 7.5 percent -- led by loans for commercial real estate developments, and commercial and industrial businesses. At the same time, they slashed their overdue loans to an average of 1.1 percent of their portfolio, compared to the national average of 1.9 percent.

In San Diego County, loans from locally based commercial banks and credit unions rose by 12 percent over the past year, jumping from $21.9 billion in the first quarter of 2014 to $24.5 billion during the same period this year.

Rancho Santa Fe Thrift & Loan more than doubled its lending over the year, with loans jumping from $7 million to $15 million. Lending at such institutions as Bank of Southern California, Silvergate Bank, Seacoast Commerce Bank and San Diego Private Bank rose between 30 and 40 percent, while loans at the Armed Forces Bank of California and the California Coast, Point Loma, Inland and San Diego Firefighters credit unions rose between 20 and 30 percent.

Most banks managed to boost their lending while preserving high ratings for credit quality and safety. Bauer Financial Inc., which rates financial institutions throughout the country, rates 18 of San Diego's banks and credit unions with five stars, or "superior," and 10 with four stars, or "excellent."

Only two local institutions ranked lower: Neighborhood National Bank, which got two stars because of its niche in providing government-backed loans to low-income borrowers, and San Diego Metropolitan Credit Union slid from four stars to three as its lending business slid slightly.

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